Friday, November 18, 2005

Changes in tax policy suggest no evidence of their impact on job creation or destruction, according to the 22-page study released Tuesday by United for a Fair Economy (UFE), an independent group that tracks the growing economic divide between the nation's haves and have-nots.

Since 1950, significant tax increases and decreases have both been followed by job losses and job gains, say the researchers.

Based on statistical analysis of changes in tax polices and rates of job growth in the past 60 years, the report points out that tax reduction does, however, disproportionately lead to economic disparity between the rich and poor.

President Bush's call to spend "whatever it takes" to rebuild the Gulf Coast set off alarm bells among some in his conservative base - and stepped up a growing debate among Republicans at both ends of Pennsylvania Avenue on how to fix the battered region in ways that promote conservative values.

From vouchers for education and Medicaid to the creation of a giant "opportunity zone" where Katrina struck, the Bush reconstruction effort - which he called "one of the largest reconstruction efforts the world has ever seen" - is reviving prospects for policy initiatives that GOP leaders say could make or break their party's future.

At the same time, fiscal conservatives, often outside of leadership, are calling for deep cuts in existing spending to pay the costs of reconstruction. They, too, see this as a fight for the soul of the Republican Party.

"It's too early to tell. It could wind up being the New Deal on steroids," says Mike Franc, vice president for governmental affairs at the Heritage Foundation, a conservative think tank.

For a president who campaigned on Ronald Reagan's legacy of limited government, the vast scope of needs in the region pose a specialchallenge. While President Roosevelt's New Deal and President Johnson's War onPoverty offer templates for a federal response, Republicans have campaigned fordecades to roll them back.

"If people can agree that the last 40 years didn't help win the War on Poverty in New Orleans and the Gulf - and even hurt it - then the debate shifts into not replicating the last 40 years," says Mr. Franc.

But if the congressional committees bog down and can't agree on a package of reforms that can be financed without breaking the bank, "the default could be going with what we already have," he adds.

In recent weeks, Republican leaders have tasked every committee in Congress to come up quickly with new ideas that meet needs in the region.

These range from a vast package of tax breaks to revive business and housing in the Gulf, to Education Smart cards, which give families the option of paying for education wherever it is available and suits their needs, including private and parochial schools.

But to move such a plan, Republicans will need coherence in their own ranks, especially agreement across their caucus on how to pay for it. For fiscal conservatives, the biggest issue in the Gulf cleanup is its price tag, expected to exceed $200 billion. Congress has already appropriated $62 billion in emergency spending..

"Congress must ensure that a catastrophe of nature does not become a catastrophe of debt for our children and grandchildren," says Rep. Mike Pence(R) of Indiana, who chairs the Republican Study Group, a top conservative caucus.

The Heritage Foundation estimates that such levels of spending could bump budget deficits past $500 billion in 2008 to $873 billion in 2015.

In response, some conservative lawmakers are calling on their leaders to find offsets for new spending, including delaying implementing the new Medicare drug benefit, rolling back pork projects in recently passed Highway and Energy bills, and evendeferring a vote on the permanent extension of Bush tax cuts. Last week, 11 House Republicans voted against a $52 billion hurricane relief bill in protestagainst the failure to identify offsets.

In a comment to reporters last week, House majority leader Tom DeLay said that after 11 years of a Republican majority, there wasn't much fat to cut in the federal budget.

The comment alarmed many conservative activists outsidegovernment who see the big spending ways of the Bush administration as a betrayal of small- government ideals.

"I have to pretty strongly disagree with the majority leader," says former GOP Rep. Pat Toomey, now head of the Club for Growth, an antitax group that backs Republicancandidates.

"Whatever money gets spent on this reconstruction effort really needs to be offset by reductions somewhere else," he adds. "It's not the role of the federal government to be rebuilding houses and strip malls...."

At a closed leadership meeting on Thursday, House GOP leaders tried to bridge divisions in their caucus by promising strong accountability on where new federal dollars are going "Whatever is expended by Congress, we want to make sure it is funded appropriately and that states and local communities, as well as the private sector, share the burden," said a House leadership aide.

While Republicans have stood by the president as he expanded the role of government in local schools and the war on terrorism, the new wave of post-Katrina spending could break that consensus at a time when the Bush's job rating is at record lows.

The bid to work conservative programs, such as education vouchers, into Gulf aid could help bridge those gaps.

"It's window dressing for the benefit of social conservatives," says Ross Baker, apolitical scientist at Rutgers University in New Brunswick, N.J.. "The president may feel that whatever support he will lose among fiscal conservatives, he will win from conservatives proud of him for bootlegging vouchers in the relief plan."

Founded on March 16, 2002, LEAP is made up of current and former members of the law enforcement and criminal justice communities who are speaking out about the failures of our existing drug policies. Those policies have failed, and continue to fail, to effectively address the problems of drug abuse, especially the problems of juvenile drug use, the problems of addiction, and the problems of crime caused by the existence of a criminal black market in drugs.

Although those who speak publicly for LEAP are people from the law enforcement and criminal justice communities, a large number of our supporting members do not have such experience. You don't have to have law enforcement experience to join us.

By continuing to fight the so-called "War on Drugs", the US government has worsened these problems of society instead of alleviating them. A system of regulation and control of these substances (by the government, replacing the current system of control by the black market) would be a less harmful, less costly, more ethical and more effective public policy.

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Comments

I welcome comments. Please keep them civil, short and to the point. Obscene, profane, abusive and off topic comments will be deleted. Repeat offenders will be blocked. Thanks for taking part — and abiding by these simple rules.

The following information is provided to help you understand the biases that may be inherent in this blog.My primary U.S. economic policy concern is the fiscal irresponsibility of government.The Baby Boom generation, which I am part of, has spent the past 30 years accumulating massive public debt that will be passed to our children, grandchildren, and subsequent generations.I am not opposed to the reduction or elimination of any government spending program.Yet, politicians tend to call for reduced spending in general terms and fail to publicly declare specific cuts they would make.The primary cause of the massive U.S. public debt is revenue reductions (in the form of tax cuts) without similar decreases in government spending.

I am willing to consider the expansion and addition of government programs as well.I do not mind how much or little the government provides to society as long as it is paid for.I am willing to pay higher taxes for services deemed worthy, whether they be national defense, homeland security, or income assistance to those less fortunate than I.And I am certainly willing to pay less in taxes or to deposit any government check I receive.My generation, the Baby Boomers, has been very good at cutting taxes and increasing the size of government, regardless of which political party is in power.This is a prescription for financial chaos that remains a horrible legacy for future generations.

About Me

I am a professor of economics at Jacksonville University, where I teach courses in introductory economics, comparative economic development, and globalization. I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.